JennyW. Hsu

Crude-oil prices ended lower Tuesday, as investors decided that talk of an agreement to freeze oil output wasn’t sufficient to alleviate a global supply glut that has dogged the market for months.

On the New York Mercantile Exchange, West Texas Intermediate crude for March delivery
CLH6, +0.00%
fell 40 cents, or 1.4%, to settle at $29.04 a barrel, after trading as high as $31.53 a barrel in electronic trading.

The prospects of an outright cut of production by some of the largest oil producers in the world fueled an initial run-up in crude prices, but the reality of a so-called freeze of output from Saudi Arabia and Russia—considered the top two producers of oil in the world—was viewed too small a step to help rid the world of record oil supplies.

“Until you can get the producers to start talking about production cuts, you’re still looking at oversupply,” said Robbie Fraser commodity analyst at Schneider Electric.

At a closely watched meeting of energy ministers in Doha on Tuesday, four oil producers—Saudi Arabia, Russia, Qatar and Venezuela—agreed to freeze output at January levels in a bid to stabilize the volatile oil market. The deal is contingent on other major producers following suit, Dow Jones Newswires reported.

April Brent crude
UK:LCOJ6
on London’s ICE Futures exchange fell $1.21, or 3.6%, to end at $32.18 a barrel, after hitting a high of $35.55 a barrel earlier.

“Agreeing to a production freeze when [these countries] have been producing oil at record levels, well beyond their quotas isn’t very bullish [for oil]…We’re still well overproducing,” said Tariq Zahir, managing member of investment-advisory firm Tyche Capital Advisors.

Indeed, OPEC’s latest report shows that in 2015, Russia’s oil production reached a record 10.8 million barrels a day. OPEC’s output also rose by 280,000 barrels a day to 32.63 million barrels a day, according to the International Energy Agency, which attributed the additional supplies to Iran, Saudi Arabia and Iraq.

Despite some traders and investors casting a skeptical eye on talk of a production freeze, some said the pact still marked a significant departure for Saudi Arabia and the Organization of the Petroleum Exporting Countries, said Phil Flynn, senior market analyst at Price Futures Group.

“There have been no production caps, but any type of restraint from these players is an about-face from what they’ve said previously,” Flynn. “A production freeze is better than what we had before, which was nothing,” he said.

Flynn said some of the major oil producers and OPEC members may be “nearing their point of pain,” meaning that there are signs that the protracted drop in oil prices has hurt revenues of some of the biggest oil-rich nations.

Oil prices have plunged more than 70% since June 2014 and could stay low for longer unless a drastic production cut helps to trim down the global supply glut. Major oil suppliers within OPEC—as well as other players, such as Russia and U. S.—have been unwilling to cut output because they want to defend their share of the market.

Prices were further bruised after sanctions against Iran’s oil exports were lifted in mid-January. Over the weekend, Iranian officials said the country had increased exports by 400,000 barrels a day.

Iran isn’t expected to cut its rate of production, particularly as it emerges fresh from economic sanctions.

With the world awash in oil, global demand is drying up.

According to the International Energy Agency, global oil demand growth is likely to ease back considerably to 1.2 million barrels a day compared with 1.6 million barrels a day in 2015.

On the bright side, Zahir said the summer driving season, which will kick into high gear in a few months, might help spur appetite for gasoline and as a result the crude oil needed to manufacture it. But how much of a gain in demand that could bring is unclear and it may be tempered by a seasonal refinery slowdown, which typically happens at the end of the first quarter. Oil refiners periodically go offline to complete repairs to their machines and that can create a backlog in oil—a bearish factor for oil prices, Zahir said.

Back on Nymex, March gasoline
US:RBH6
lost 7.23 cents, or 6.9%, to $0.9709 a gallon. March heating oil
US:HOH6
lost 4.23 cents, or 4%, to end at $1.0270 a gallon, while natural gas of the same contract
US:NGH16
finished 6.3 cents, or 3.2%, lower at $1.9030 per million British thermal units.

—Jenny W. Hsu contributed to this article

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